NSE’s Geoffrey Odundo on the economic impact of COVID-19

The global economy has been grappling with the far-reaching effects of the COVID-19 pandemic since the beginning of the year. From economic powerhouses like China to the United States and Europe, countries across the globe have been facing significant challenges. In East Africa, specifically at the Nairobi Securities Exchange (NSE), the impact of the pandemic has been pronounced. CNBC Africa recently sat down with Geoffrey Odundo, the CEO of NSE, to discuss the economic implications of the crisis and the strategies being implemented to navigate these turbulent times. Odundo highlighted the importance of resilience and caution in the face of uncertainty, as the world teeters on the brink of a possible global recession. With economies gradually reopening and oil prices showing signs of recovery, there is a glimmer of hope for some level of resilience. However, the looming threat of a second wave of infections serves as a stark reminder of the fragility of the current economic landscape. As companies grapple with the implications of the crisis, decisions around dividend payments and capital retention have taken center stage. Odundo emphasized that these decisions are contingent on each company's internal preparations and risk assessment. While some companies, like equity-bound group, have opted to hold off on dividend payments to bolster their capital reserves, others have chosen to weather the storm by paying out dividends. The restructuring of loans by banks has also had a cascading effect on capital allocation and financial decision-making. Odundo underscored the need for a cautious approach, as companies navigate the uncertainties brought about by the pandemic. Private equity firms have emerged as key players in the region's investment landscape, offering vital capital to companies in need of funding. The ease of access to capital from private equity firms has fueled significant growth in this sector, posing both opportunities and challenges for public markets like the NSE. Odundo stressed the importance of collaboration between private and public markets, highlighting the unique value proposition that public markets offer in terms of exit options and price discovery. By fostering a spirit of collaboration, both private equity and public markets can work together to support the growth of businesses in the region. In terms of financial instruments for investors, the NSE boasts a diverse range of offerings, including equities, bonds, exchange-traded funds, derivatives, real estate investment trusts, and green bonds. Odundo recommended investors to consider assets with resilience, such as the gold ETF, which has seen a surge in value amidst market volatility. Additionally, the bond market and derivatives present attractive opportunities for investors seeking hedging products in a volatile market environment. As the world continues to navigate the economic fallout of the pandemic, the insights shared by Odundo shed light on the strategies and considerations necessary to weather the storm and emerge stronger on the other side.